DBS puts on hold loans to buy vehicles |03 August 2011
Mr Toussaint said the DBS is doing its best to raise funds to meet clients’ demands which “have increased since the bank started offering attractive rates”.
He said there are about 200 pending applications for loans to buy vehicles. These are for taxi, pick-up, omnibus and car hire.
“These requests amount to about R40 million and we are negotiating with some commercial banks to take up these clients.”
He said it will definitely depend on the clients but these banks have also reduced their rates to accommodate such requests.
He added that the DBS has made this decision as such loans will help deplete its cash flow.
“We are now focusing mainly on our mandate to cater for the needs of the productive sectors of the economy like fisheries, agriculture and tourism.”
He said these areas add value to the economy and in turn create employment, reduce imports and further create wealth to promote economic growth.
“In 2009 we approved about 60 applications for vehicles which represented R7.1 million and last year the figure was 194, representing around R82 million.”
And up to June this year “we have approved 107 requests worth around R46.8 million”.
Mr Toussaint added that in 2010 alone the bank approved 486 loans worth R272 million compared to 174 loans for R78 million in 2009.
“This represents a significant increase in loans, almost R200 million, and more than 300 loan applications above 2009.”
So far this year the bank has approved about 248 loans worth almost R133 million which he said is comparable to what was approved over the same period last year.
“We have budgeted to disburse a total of R111.3 million for the whole of 2011 and already R68 million has been disbursed,” he said.
”This shows that the bank is disbursing much more than its target and if it continues at this rate it would need a lot more fund to continue with its financing activities,” Mr Toussaint added.
He said there were criticisms that the bank was a bit slow with its loaning procedures. He explained that in 2009 its officers handled 20 loans each and this figure jumped to 50 after the change in lending policy last year and it has gone up to 60 this year.
Mr Toussaint also said last year the DBS saw the need to raise bonds to finance its activities.
“It launched two bonds issue of R50 million at 5% and 5.5%. Early this year we made another issue of R50 million at 6% and we are in the process of launching another one for R50 million.”
This will be done in two parts – R25 million at 7% over three years and the other R25 million at 7.5% over a five-year duration.
These bonds issue will be higher this time as treasury bill rates have also gone up, he said.
“For that we will put forward our proposal to our shareholders for a revision of our interest rates depending on the change in our cost of funds after the bonds issue.”
He said if there is an increase in the bank’s cost of funds, it will likewise pass it on to borrowers.
“We are also in negotiations with our foreign partners namely European Investment Bank, Arab Bank for Economic Development in Africa, Export-Import Bank of India for long term lines of credit,” Mr Toussaint said.